Interest rates have been slashed to two per cent by the Bank of England's Monetary Policy Committee this lunchtime.

The one per cent cut had been demanded by businesses in dire need of a boost to the economy.

The reduction is also good news for home owners, particularly anyone with a tracker mortgage.

So far, however, banks have refused to say if they will pass the cut on.

Further cuts are likely in the New Year and some pundits now say the interest rate could be zero by the Spring.

Stephen Slater, commercial services partner at accountants RMT, said: “The move by the Bank of England to cut the base rate by a further one per cent may help to stimulate further confidence in the North East business community, but only if financial institutions pass on the rate reduction.

“Christmas is a crucial time for business and it is imperative to pass these interest cuts on swiftly so that everyone benefits as quickly as possible.

“While interest cuts are welcomed on one hand, on the other it is worth considering that repercussions may follow, for example savers will earn less interest on their funds.

"Time will tell just how big an impact these cuts will have in improving the current economic climate.”